ACICIS Community News

ACICIS student, Rebecca Lawrence (Semester 41/Aug 2015), who is completing the Flexible Language Immersion Program in Yogyakarta with an Australian Government New Colombo Plan Scholarship as a part of her degree at the University of Western Australia explains the problems with the Jokowi Administration’s protectionist approach to live cattle imports.

This article was published by Menzies House (article aknowledgement: Jokowi’s Beef). Approval has been provided to ACICIS to reproduce this article here.

“I am an Australian student, studying Economics and Indonesian language, and spending this semester studying abroad in Yogyakarta, Indonesia. Back in July, I saw the Australian media flood with stories (here, here and here) about how the Indonesian Government had slashed the quota of Australian beef imports to 50,000 cattle for the July – September quarter (an 80% cut from 250,000 the previous quarter).

The policy was coupled with hopeful talk by Indonesia’s Agriculture Minister, Amran Sulaiman, about movement towards self-sufficiency in the agriculture sector, however, beef prices have predictably soared since July. Since moving to Indonesia in August, I have observed the devastating side-effects of the Indonesian Government’s simple mistake. The country has not only suffered considerable increases in beef prices, but also significant lay-offs of beef workers, beef trader’s strikes, meat shortages and recent increases in chicken prices. For a country that consumes relatively little pork and lamb, that last point in particular is a very bad sign.

In recent days, the Indonesian Government has confirmed that they will be importing an extra 50,000 cattle, but are yet to announce the source of the additional imports. While this will partially alleviate the domestic supply issues, the original mistake of slashing the Australian quota will have a lasting impact. On top of affecting Indonesia’s reputation as a stable trading partner, the volatile quota setting has logistical implications for cattle importers – for instance, it is not cost effective for importers to ship cattle to Indonesia in small increments.

This mess should serve as a reminder that trade is mutually beneficial – if the quota had not been slashed, then Indonesia’s growing middle class would be enjoying more affordable beef and chicken, and Australia’s farmers would not be desperate for “another place to send the extra cattle”. Truly, the very quota system, whereby the Indonesian Government arbitrarily decides how much beef to import at three-month intervals, is clearly outdated and ineffective, particularly when the Government is prepared to change the quarterly import quota by such significant increments at such short notice. It is factors like this that inhibit Indonesia’s standing as a reliable and safe trading partner.

On the surface, the Jokowi Government appears to have made some sensible decisions in recent months, including ending fuel subsidies, dissolving 100 unnecessary Government bodies and relaxing visa requirements for foreign visitors from 30 countries (not Australia).

Under closer scrutiny, however, many of the economic policies of the new government have been wildly unwise. The implementation of the removal of fuel subsidies was a disaster (rather than allowing the price to rise to market value, the government removed the subsidy but left the price ceiling on fuel, forcing petrol companies to bear the difference in cost), the cuts to road toll fees have damaged profitability and scared off investors, price controls on cement which have all but killed the industry and, most recently, significant price controls on staple foods which will continue to distort the market for months to come. All of this has culminated with the steady decline in value of the rupiah, which recently hit its worst level since the 1998 Asian Financial Crisis.

I chose to study Indonesian, and spend 12 months living in Indonesia, because I have faith in the future of the Australia – Indonesia relationship. Both Governments provide funding to encourage students to study in their neighbouring countries, among a range of other policies designed to ensure goodwill and strong bilateral ties. Despite significant cultural differences, the tourism trade between the two countries has never been stronger.

In order to cement a meaningful, lasting relationship between the two countries, our economies must become further intertwined. My fear is that excessive government intervention in the market, in the form of import quotas and price controls, will ruin the credibility of Indonesia’s economy. Unless Indonesia can provide opportunities for realistic and reliable trade and investment, my generation of Australians will continue to see their neighbouring country as nothing more than a cheap holiday destination.

Economic policy is a complex and multi-faceted field, and answers to economic problems are not always straightforward. Jokowi is constantly forced to consider not just the economy, but also a range of political factors in all his decisions – tensions within his own party, the composition of the Parliament, domestic popularity and also overseas perceptions. The solution to the beef problem, however, is simple – reinstate a higher quota on imported Australian beef next quarter, which will improve bilateral trade relations with Australia and keep domestic meat prices low – a win-win solution.”

Rebecca Lawrence is a third year Economics and Indonesian Language student from the University of Western Australia. After spending one semester studying in Indonesia in 2014, Rebecca has returned to Yogyakarta on an Australian Government New Colombo Plan Scholarship for Semester 2, 2015.